DYNT - Earnings call transcript Q1 2018

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Kelvyn Cullimore Jr.

Good morning everybody. We welcome you to the Dynatronics Corporation Investor Conference Call to review the results of our quarter ending September 30, 2017, which is the first reporting quarter of the fiscal year 2018. I’m Kelvyn Cullimore Jr., Chief Executive Officer. With me on the line this morning is David Wirthlin, our Chief Financial Officer. Today we filed our 10-Q for the quarter ending September 30, 2017 and issued an earnings press release. of as may during future make the financial begin, this course events we future management call, forward-looking performance before a the reminder, of or And company. the statements regarding differ risks involve projected could results the uncertainties Those perhaps forward-looking statements from statements. and materially such cause that actual to in results filings disclosures, including in any factors and risk most that you be the caution report XX-K. specific most statements should on SEC, considered data including contained with in recent annual We such conjunction its company’s recent with the the Form financial going Today, & results XXXX, Cronin. ended talk and we’re the XX, to operating specifically about September Bird from the the of acquisition quarter have At operator questions. the open the up for of conclusion commentary we’ll the call our

most First, over I asset acquire last of Inc. important of XX-K of purchase month the a call, signing Bird to & want XX. just our filing we to since bring On the an in agreement on event September ago a that assets announced you the Cronin, current

As planned X. acquisition that we October on close

United proprietary & refresher, brands. last These manufactures and and sales founded company XXXX in and a a years in Minnesota three under label averaged for Cronin designs As soft sold the are million. have patient internationally care that goods products and specialty products. XX private orthopedic is the States Annual Bird approximately

statement the $X.X closed $XX.X $X.X acquisition We under that of million we forma preferred a warrants. $XX Preferred EBITDA and of million is Cronin regard subject forma. XX, to Preferred and with on $XX and borrowing three pro we adjusted our XXXX, various were our of matters, Annual scheduled the consideration, asset-based of to placement to filing facility a stock, D extended we into preferred cash is shareholder concurrent approval of the shareholders XXXX At million on which modified million with to Meeting not which conversion the XXXX, for prior $X employees have October the calculation. holdback. be D stock At loss cash to company XXXX Series automatically We operate out The favorably all used approximately C are that we announcing to XXXX. Preferred $X years refer XX, C The the company the on from was XXXX data the XXXX. pro from net combined and I’m securities, will F-X October, acquisition generated The end approval Preferred the D we to including X, the the & stock was at Bird and and For on private to X-K cash or Hausmann to convertible $XX.X closing closing underlying in Series the $X.X capital. and our upon profits maturity of Series and X.X common October proceeds in the of Bird June approximately reacted to modification $XX Series in and base in XX Shareholders, further on a C million earlier the common of the acquired effective we operating team with registration credit Bird common synergies common Preferred lending doing of XX, as the borrowing C as the this to and million purchase of sale & with approximately paid existing portion facility was Series million million of the acquisition including XX, Cronin issuance very of of the X.X million November Certain million ended financials our Series the but transaction the year, the increased registration shareholder acquisition stock closing, facility seek statement that and October an you details C as and September funded With acquisition and with Warrants, pleased months Customers they trailing convert price holdback report that so estimated this date we we included credit C the million as approval. of was to adjustment. Form in year. to The those Preferred financing has to pretax and for smoothly. million. management Preferred credit the intent coming approximately well asset-based from done included funded September Series the & filed Bank of that of X, may funding to of D operational Cronin preferences the entity provide West also amended transaction. seek our and elect to filed subject stock Preferred of On to dividends. over

management are goal that a to excellence full place a we and of year team and operations some create our the fruit controls and that during the is belt first over month little primary hanging other than relative assure it’s disruption Bird leadership exist can to Our of the just continued management anticipated. of that picking are may is we Well capable fit operational that the confident as the Cronin low financial into has as synergies. cultural to & in

continues to record Hausmann to period XXXX continues a sales results. for pleased ending September XX, build positively had very operating our also and quarter actually acquisition to Hausmann in of very the well. the are contribute consolidated to report We that

of million addition time I’d positive and our we will we to acquisition. like believe $XX in ended acquisitions, fiscal operations. of my strategy have rate more our Chief sales the direction by I’ll with two approximately run with at significant taken to grow quarter these David? operating the an annualized With $XX right acquisitions, September, XXXX. these the in provide Financial September we we XX, we steps two remarks, make to flow believe turn few Consistent on million executing gave we’ll from a to a Officer David generate Wirthlin, to now, report but financial comments the in closing cash in

David Wirthlin

this Thanks, XX, and material had factors for will There release detail results significant impact that a some Kelvyn. a on of was press our I additional to that XXXX. ended provide morning. color couple September are the operating quarter the issued

had impact. The Hausmann XXXX this material not comparative in the the was of results fiscal of include fiscal first to quarter consolidation the First, operating XXXX as did acquisition. it quarter Hausmann of a prior

XX, sales with year. on significant the Hausmann be Sales quarter. that for not year Net sales XXXX. season products indicative million growth Second, in growth Hausmann experienced million & quarter that This ended at sales million September particularly for is when $XX.X comment their over SG&A XX, the acquisitions in to the in the and related legal ended will $X.X quarter noted the approximately in acquisition The fees XX.X% the primarily we of XXXX were contributed expected addition September be $X.X the represented should commercial of million quarter quarter to and for Bird $X.X several business discussing quarters million, $X.X by of increased for XX.X% million year-over-year sales believe in mostly net the the quarters. approximately contributed neisserially in next operation comparative of from strong to XXXX current Hausmann is in both ended compared the we legacy came Acquisition or XX, I in It of incurred the the prior sales quarter. increase conjunction quarter to what sales for an percentage quarter acquisition. Cronin. historically prior XXXX. should quarter costs $X.X were same them the indicative in September for flat and costs approximately the and the the accounting last best $XXX,XXX further the

drivers of to approximately XX, Hausmann to gross gross profit to increased in to quarter year. of and period approximately Hausmann XX, to XX.X% and primary and September manufactured ended related $X.X representing shifted the quarter The attributable with $XXX,XXX million additional quarter XX, of ended XX.X% in general the XX.X% Gross the acquisition $X.X increase a XXXX compared freight of in $X.X $X.X XXXX. products, mix which the Selling, the the $X.X or sales products, were XX.X% $XXX,XXX approximately September approximately was the expenses contributed margin higher towards XX.X% or to from costs. million is ended operations margin XXXX. of acquisition. administrative September the the September acquisition more the primary million million million, addition for profit Hausmann decrease the Cronin XX.X% mix, million primarily same operations $X.X $XXX,XXX associated product for for sales, sales, were prior XXXX. in or heavily of quarter compared in increased & the million in for expenses year-over-year $X.X for year-over-year million ended Bird higher approximately However, difference, quarter Hausmann of from the $X.X The The percentage change

of stock, programs loss the applicable expenses of $XXX,XXX income quarter previous common dividend decreased the are acquisition of Series we in a either compared D of stockholders the same in for ended Preferred with holders estimating A that of additional no accounted the XXXX. the net quarters or $XX,XXX quarter quarter are operations XX% the Series XXXX in There development X.X% common the deemed development quarter changes Preferred second XX, to loss for same a Cronin. Series XXXX a XX, The $XXX,XXX Because year. to XX, no due is of been issuance fiscal stock a completion been deemed were $XXX,XXX with new expenses associated attributable $XXX,XXX These and Research Bird in dividends prior XX, reflects Note, Net XXXX and Hausmann decreased preferred income of income operations profit of expenses dividend was the only increase acquisition. September quarter to fiscal to increase included by in year. A compared first to a dividend A was September Series at to some of of connection Hausmann expenses of legacy Series SG&A associated first issuance associated common are eliminated. quarter or the with shares quarter XXXX certain Preferred compared reduction the the in issuing was decrease to the for dividends non-cash compared stock September for to the Series was improvement deemed with XXXX B that stock. increase $XXX,XXX we the of as which connection product ended Net SG&A we in the ended Preferred XX, accrued about prior XXXX shares with subsequently to of that addition and net has for in in the the in the applicable common in the stock gross of the issued for others that our and Net driven reaching be $XXX,XXX quarter primarily quarter in prior ended consolidation offering impact $XXX,XXX all preferred there stockholders We shares completed XXXX of issued there stockholders Preferred stock. year. XXXX. same XXXX in $XXX,XXX. the the by in September of applicable $XX,XXX in by Excluding and a B expenses. will and Series of quarter The the dividends to quarter paid with XXXX we XX% $XXX,XXX September acquisition & are April our a our these of C December loss ended the to period. The

transaction. increased from $X we in our $XX mentioned, asset-based credit to the million of Bird with & previously conjunction million Cronin line As

of million base of to of close transaction transaction to averaging the the million million day of million more Kelvyn some open borrowings of closing of borrowing on to $X.X on credit recently on That will to cash $X $X.X make we $X.X borrowing final for was business borrowed and credit $X based line million. available operating remarks approximately $X last the summarizes September before on balance hand leaving assure adequate our that we between the October averaging questions. X. our On results. that line is $X line million between approximately our million the Prior subsequent on and the

Kelvyn Cullimore Jr.

& major David. strategy. Thank reflect you, acquisitions Hausmann for acquisitions The the ongoing been implementing our year. Bird to have These our of last commitment acquisition focus a Cronin and completion

acquisition, along improved We $X.X profit compared more of to the the pleased legacy are same in quarter very resulted in Hausmann year. the addition expenses Hausmann operating with with million SG&A in than reductions in quarter last the

excited equally about & are We Cronin. Bird

we’ve profitable engaged becoming we’ve and & operation. impressed the of of their Cronin part tracking upon And at with the customer been employees since As enthusiasm their and service management closing, the exemplary Dynatronics excellent products providing Bird running a levels with to dedication team.

the and therapy In training markets. inquiries service the line high level and large we physical to about the of With their Bird quality. major chiropractic have received practice, into score Bird customers have many opportunity accessing & consistently to distributors Cronin Cronin products. of fact, Likewise Cronin athletic platform from private & Dynatronics Bird expand cards products our & distribution relative made

to just with the explore transaction. beginning this We’re associated opportunities

Hausmann into conservative the $XX account and in XXXX million a operating of of and average which run the that three consolidated of revenues all $XX Looking XXXX year view fiscal a taking range forward rate to for annual of year, & $XX to inclusion of XXXX combined Cronin first the be million quarters on Bird our for fiscal million. based for

the We business single-digits Bird Dynatronics, continue that will the revenue thereafter. top go line to in optimistic & be Cronin mid combined Hausmann,

be and of to XX% going-forward That incurred and debt about amortization interest sales. depreciation the cost to be some additional expect the will general position to gross selling, We impose XX% as of facilitate to and to our costs related administrative well acquisition. consolidated tangible margin service in assets the range increased as

QX expect this in fiscal reported $X.XX also addition approximately in expenses consolidated of We to fiscal residual charges remainder expect non-cash in during XXXX we transaction the for XXXX. the and transaction million to quarter, be expenses year

the Cronin businesses. combined want combined on details I additional financial impact are & quarter provide of inherent seasonality Bird published. the the highlight will We results after a to in

& Cronin not year. Bird through have First, revenues the varied significantly

Hausmann Second, September quarter ended quarter XX. historically has been strongest the

quarter has has Third, weakest fiscal the December XX. Dynatronics, that The strongest been for second ends March Hausmann Dynatronics then quarter traditionally quarter quarter typically both XX. our ended and

in the no the sales would to seasonality. that would $XX $XX Looking remaining if three forecast we combined, average after businesses quarter, nine conservatively months of $XX million in per to million were year million $XX there million

quarter Much and However, XXXX. the the quarter in Hausmann quarters, with anticipate the seasonality this margins year of of legacy productive higher of the costs combined In averaging for on by transaction in operating year. also this profit we the the gross the profit would of impacted low the XX% addition being gross high in of will the with the side for company. Those pretax being summary around more the average best the expense a March reflection XX, quarter. margins ended expected for the related on Hausmann profit quarter still in margins December quarter the side while ended incurring be posting of during division of reduction in the is $XXX,XXX resulted $XXX,XXX the SG&A in despite operations possibility XXXX

the As comparative continue prior we flow to of improve relative three next the & should year. profits periods in to operating Cronin the add company Bird quarters, operations the and in cash the we

the to month our cost During consolidation of these consolidation will We we beginning result our operations the of savings distribution the facility in completed California $X,XXX quarter, operations. believe Utah per also with $X,XXX January. of Livermore, in

demonstrate implementation Cronin will identify our milestones our on of our our both margin. continue the enhance strategic in element of to our to and plan. and leverage results gross this network and the Bird and Industries product acquisition additional sales we that distribution execute offering profit act growth important to on opportunities will current and further coverage both Our of & are acquisitions plan They improve Hausmann

We’re to business coming a planning all gross that accounting lines reduce within in better and company. finding our improve the and to the provide supervision Dynatronics a to company. attention department restructuring also manager ways additional in as well in attention margins management legacy also of the to operating analyze streamline analysis to profit and recently costs. bring to more months bring To and the end resources restructured turning sales and controller be marketing and finance the resources We’ve and corporate margins improve financial we’ll to operating reporting our marketing efforts as and the our

on All is to provide which sales. sales of domestic which growth, primarily is focused designed

the growth efforts discussions Finally, holding that markets analysts. to Relations and strategic to conferences performance. to alert investors will our key appropriate we end be To recognize Investor in and better we participating need the and investor continue objectives with our

shareholder communications. We committed Give provide. to ways for customers enhancing have at In be Jessica, effective to for with looking and the support in team open to done. growth from shareholders dialed building addition, to improve appreciate will the on The our take now who and business our instructions be we we’ll the do our shareholder products, is line value. management acquisitions Dynatronics those organic that’s our how safe and call. questions to serving

Operator

Instructions] Thalmann]. Jeffrey Cohen go [Operator [Ladenburg And we’ll Absolutely. to first

Jeffrey Cohen

David. you me and hear okay? Can Kelvyn Hi,

Kelvyn Cullimore Jr.

hear can just you We fine.

have You line a just good overseas. from

Jeffrey Cohen

Great.

any territories I last there So of just month upon in a ago. few a months two couple should the or effect say, questions. Was storms the

Kelvyn Cullimore Jr.

some clinics damaged saw the the and severely there storms were everybody being that orders increased had of who area down not over But impacted from in Houston impacted. by orders The quarters. few several were be there We believe material. the delivered as we We that next because delay a there knows. quarter some was pretty customers severely will unfortunately do slight

David Wirthlin

by was impacted to facility our flood. just the there add that, to not And

Kelvyn Cullimore Jr.

That’s correct.

Jeffrey Cohen

Okay.

bit may over the you see still So into a QX? little – of

Kelvyn Cullimore Jr.

Yes. know clinics But are indicated anything were QX, do will some that that I’m replacement they’ll noticeable. QX QX, there products. it that material that damaged be not be have sure we need will some severely

Jeffrey Cohen

and Okay, more little those and as opportunities distribution the sales got cross-selling more the give Cronin color channels force a Can us But from some as combined. your far & from into of guess you recently Bird it. and insight your acquisitions? both I

Kelvyn Cullimore Jr.

Cronin minimal the approach done hospitals our Like deliberately that typically work Sure. carefully in and Bird users The we users. as sell and products disruption. over & institutional to those the These Hausmann, of consider to with are strong uses can a well. year with those presence opportunities therapist. institutions and orthopedic we’ll be first physical has are in similar to practitioners

of believe private take & However, athletic introduce network leverage practice, been to similarities the chiropractors there’s more & there we the done Dynatronics training, maybe Likewise, the there. our opportunity to an aggressively legacy expand through Cronin so markets. channel sales in has it as with products and Cronin the Hausmann, opportunity Bird products them to distribution some Bird PT,

Jeffrey Cohen

Okay, were indicating are of you got or that a hoping we when forecasted yet stronger for margins XXXX. up Are super tick margins conservative like will quarter. XX% of slightly. your for kind so around range little this the But it. you’re being It looks balance the you

Kelvyn Cullimore Jr.

up our to tick expectations hoping We’re efforts of are try up XX%. focusing in we’re to range will the always be but drive that they slightly and them

Jeffrey Cohen

like than million. that It’s sounds little of in line there. about a million balance you’re for bit a stronger the any to you’re XXXX of insight that’s you $XX stronger quarter top expected the range kind for could And Okay. we comment lastly, than providing and little came $XX

David Wirthlin

account Hausmann for the looking Cronin and fiscal year. of taking a operating inclusion all the and with combined of We’re three XXXX first quarters conservative view & for of Bird forward into the

our consolidated million. the year of XXXX expect fiscal million year to to $XX full be revenues – range We for in the for $XX

expect of line be quarter about to Overall And the the the the learning sales in mentioned. to seasonality seasonality and in year we given. range with first full for still to had we previously million companies, Kelvyn the discussed $XX acquired We’re million the with reflect as his comments. $XX rest year the very in guidance a dead of to be expect

Jeffrey Cohen

Okay. digesting to commentary in acquisitions focused little And a then your and upon the or for going Bird us give lastly, go most M&A opportunities of to continue XXXX growth can you are be opportunities forward. as you & look bit the cross-selling about we Cronin,

Kelvyn Cullimore Jr.

and asking forward Question our repeat? you going you Can something said about about… Jeff plans M&A you’re then

Jeffrey Cohen

how additional to Yes. on focused on about In closing streamlining and focused you and a and way what continue the and those upon you are what out two the there? seeing you opportunities are effort tracking

Kelvyn Cullimore Jr.

Okay.

stages in with several We’re of companies. discussions various

and to opportunities gross on key further will sales enhance acquisition complete on that And focusing be have pipeline. transactions integration coverage acquisition executed profit the past, network, flows. others said on we’ve year distribution more of to year per our on those an the our focusing leverage and average. we’ve product in We’re And cash as and our but margins continue improve in offering, do current in complete we calendar the we’ll we expect the calendar

Jeffrey Cohen

me. Thanks That got from it Okay, does very much. it.

Kelvyn Cullimore Jr.

Okay.

David Wirthlin

Thanks Jeff.

Operator

And there no it further are questions. appears

give However, to are And opportunity. final or like conference remarks. the questions. our I Instructions] additional it presenters further a there to I’ll closing for turn over back no would any appears [Operator everyone

Kelvyn Cullimore Jr.

the to three of And call today. who months. look forward have been And appreciate Thank you we our Jessica. on very those call I in you much next

free If us. for please you being in call Thanks to feel today. questions interim, the contact have on the

Operator

presentation. you participation. This your concludes Thank for today’s

Dynatronics (DYNT) 14 Nov 172018 Q1 Earnings call transcript